Falls Church, Va.–Vornado Realty Trust is officially done with the struggling 2.6 million-square-foot Skyline office complex in northern Virginia. The New York-based REIT let the eight-building property go into foreclosure because the income from the half-empty office buildings wasn’t covering the debt it owed.

This week, the REIT announced the final disposition by the receiver of the Fairfax County properties and said all assets, approximately $237 million, and liabilities of about $723 million related to the Skyline campus would be removed from its balance sheet. In the fourth quarter, Vornado will recognize a non-cash financial statement gain of approximately $486 million and no taxable income.

The property went up for auction at the Fairfax County Circuit Court just before Christmas, but the Washington Business Journal reported that no commercial real estate owners or developers showed up to bid on it and so it was sold for $200 million to representatives of the special servicer. Vornado had a $678 million loan on the Skyline property that was part of three CMBS loans that it had stopped making payments on earlier this year.

The eight buildings located in an office park along George Mason Drive and Leesburg Pike were older, built between 1972 and 2001, and were occupied mainly by government offices and subcontractors that were hit hard by the 2012 Defense Base Realignment and Closure. They range from the 272,000-square-foot Two Skyline Plaza to the 409,802-square-foot Skyline Technology Center that included 66,562 square feet of lab space and a data center along with 10,000 square feet of retail. Several other buildings also include some retail space, according to Yardi Matrix.

Vornado, which is one of the largest landlords in the Washington, D.C. metro area, did not include the Skyline properties in its planned spin-off of its Washington area properties. The REIT announced Oct. 31 that it was spinning off most of the Washington portfolio and merging it with The JBG Cos. in a deal worth $8.4 billion. Vornado is spinning off the business known as Vornado/Charles E. Smith with the operating company and certain assets of JBG, a leading Washington, D.C., real estate company that controls more than 22 million square feet of office and multifamily properties and land for future development. The combined company will be called JBG Smith Properties and will be the largest real estate company in the region with 79 assets, including 50 office properties totaling about 11.8 million square feet. The portfolio will include urban properties along with assets in the region’s top submarkets, including Crystal City, Pentagon City, the Rosslyn-Ballston Corridor, all in Virginia, and Bethesda, Md.

When the transaction is completed in the second quarter of 2017, Vornado will be split among three separate REITs: Vornado, which will have the New York City office and retail assets along with the 1.8 million-square-foot office building 555 California St., in San Francisco and the 3.7 million-square-foot theMart in Chicago; Urban Edge Properties, a shopping center spin-off; and JBG Smith.

Vornado Chairman & CEO Steven Roth previously noted that the company had been looking to streamline for several years and felt the best strategy was to separate the New York assets from the Washington, D.C., properties. Other parts of the D.C. portfolio besides Skyline had been suffering with low occupancy in recent years due to government cutbacks.